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![Pakistan Limited, the Company has gone from strength to strength, reflected in its consistent
financial performance, growth of the core fertilizer business, and diversification into other
businesses.
It was year 1997 when Engro Chemical Pakistan limited decided to establish Engro Vopak
Terminal Limited on 50/50 partnership basis between Engro and Royal Vopack of Netherlands,
for handling bulk liquid chemical storage at Port Qasim Karachi. In that same year Engro Asahi
polymer Chemicals limited was established in a result of joint venture between Mitsubishi
Corporation and Asahi for the manufacturing and marketing of PVC resin.
Engro EXIMP was established in 2003, after which in 2005 Engro decided to diversify their
business more by venturing into the food business by establishing Engro Foods Limited.
Engro also ventured into the power generation business by setting up Engro Energy Limited in
2006, which later on was renamed as "Engro Powergen Limited" in 2008. It was established with
the basic aim to play Engro's part to tackle the energy crisis in the country.
In year 2007, Engro Asahi polymer divested its share in joint venture with Mitsubishi and the
company renamed as Engro Polymer and Chemicals Limited.
In 2010, keeping in view the immense diversification of Engro Chemical Pakistan Limited, it
was decided to rename the company as Engro Corporation as the holding company.
In the year 2011, Engro Corporation had a major global diversification with the acquisition of
US-based Company, Al Safa Halal.[1] This new business venture comes under Engro Foods
Canada Ltd and its subsidiary Engro Foods USA, LLC. Al Safa Halal targets 7 million
populations of Muslims in North America.
National Foods:](https://image.slidesharecdn.com/f48bbb9f-4534-4f14-a0e8-6695241ec866-150630101326-lva1-app6891/75/Financial-Statements-DM-8-4-2048.jpg)
Financial Statements DM (8)
- 1. Term Paper Financial AccountingII Financial Analysisof EngroFoodsandNational FoodsLtd 2015 SyedHamza, 3/26/2015
- 2. Contents Introduction .......................................................................................................................................2 Abstract.............................................................................................................................................5 Financial Statements...........................................................................................................................6 Engro-FoodsLtd. Financial Statements:...........................................................................................6 Engro-Foods 2014 Financial Statements: ......................................................................................6 Engro-Foods 2013 Financial Statements: ......................................................................................9 Engro-Foods 2012 Financial Statements: ....................................................................................12 Engro-Foods Horizontal Balance Sheet Comparative Analysis: ....................................................15 Engro-Foods Horizontal Income Statement Comparative Analysis: ..............................................17 Engro-Foods Vertical Balance Sheet:..........................................................................................20 Engro-Foods Vertical Income Statement:....................................................................................22 National Foods Ltd.: .....................................................................................................................24 National Foods 2014 Financial Statement: ..................................................................................24 National Foods 2013 Financial Statement: ..................................................................................27 National Foods 2012 Financial Statements:.................................................................................30 National Foods Horizontal Comparative Balance Sheet:...............................................................33 National Foods Horizontal Comparative Income Statement:.........................................................36 National Foods Vertical Balance Sheet: ......................................................................................38 National Foods Vertical Income Statement:.................................................................................40 National-Foods & Engro-Foods Condensed Common Size:.............................................................41 Income Statement:.....................................................................................................................41 Balance Sheet: ..........................................................................................................................42 Conclusion of Common Sized Financial Records:........................................................................43 Financial Ratios................................................................................................................................44 Engro-Foods:................................................................................................................................45 Solvency Analysis:....................................................................................................................45 Profitability Analysis:................................................................................................................45 National Foods: ............................................................................................................................48 Solvency Analysis:....................................................................................................................49 Profitability Analysis:................................................................................................................49
- 3. Introduction HISTORY OF BOTHCOMPANIES Engro foods: Engro Corporation is a Pakistani public multinational corporation based in Karachi with subsidiaries involved in production of fertilizers, foods, chemicals, energy and petrochemicals. Its major subsidiaries include Engro Fertilizers - which is one of the largest fertilizer manufacturers of the world, Engro Foods which manufactures processes and markets dairy products, frozen desserts and fruit drinks including the ice cream brand of OMORÉ. Other major subsides include Sindh Engro Coal Mining Company, Engro Powergen Limited and Engro Polymer & Chemicals Limited. As a holding company its subsidiaries include: Engro Fertilizers Limited Engro Foods Limited Engro Eximp Private Limited Engro PowerGen Limited Engro Polymers and Chemicals Limited Engro Vopak Limited Elengy Terminal Pakistan Limited It was 1957 when in search for oil by Pak Stanvac, an Esso/Mobil joint venture led to the discovery of the Mari Gas field near Daharki Pakistan. Esso proposed the establishment of a urea plant in that area which led to a fertilizer plant agreement signed in 1964. In the subsequent year, Esso Pakistan Fertilizer Company Limited was incorporated, with 75% of the shares owned by Esso and 25% by the general public. The construction of a urea plant commenced at Daharki in 1966 and production began in 1968. At US $43 million with an annual production capacity of 173,000 tons, it was the single largest foreign investment by a multinational corporation in Pakistan at the time. In 1978, it was decided to rename the company from Esso Fertilizer Company Limited to Exxon Chemical Pakistan Limited. In 1991, Exxon decided to divest its fertilizer business on a global basis. The employees of Exxon Chemical Pakistan Limited, in partnership with leading international and local financial institutions, bought out Exxon’s 75% equity. This was at the time and perhaps still is the most successful employee buy-out in the corporate history of Pakistan. Renamed as Engro Chemical
- 4. Pakistan Limited, theCompany has gone from strength to strength, reflected in its consistent financial performance, growth of the core fertilizer business, and diversification into other businesses. It was year 1997 when Engro Chemical Pakistan limited decided to establish Engro Vopak Terminal Limited on 50/50 partnership basis between Engro and Royal Vopack of Netherlands, for handling bulk liquid chemical storage at Port Qasim Karachi. In that same year Engro Asahi polymer Chemicals limited was established in a result of joint venture between Mitsubishi Corporation and Asahi for the manufacturing and marketing of PVC resin. Engro EXIMP was established in 2003, after which in 2005 Engro decided to diversify their business more by venturing into the food business by establishing Engro Foods Limited. Engro also ventured into the power generation business by setting up Engro Energy Limited in 2006, which later on was renamed as "Engro Powergen Limited" in 2008. It was established with the basic aim to play Engro's part to tackle the energy crisis in the country. In year 2007, Engro Asahi polymer divested its share in joint venture with Mitsubishi and the company renamed as Engro Polymer and Chemicals Limited. In 2010, keeping in view the immense diversification of Engro Chemical Pakistan Limited, it was decided to rename the company as Engro Corporation as the holding company. In the year 2011, Engro Corporation had a major global diversification with the acquisition of US-based Company, Al Safa Halal.[1] This new business venture comes under Engro Foods Canada Ltd and its subsidiary Engro Foods USA, LLC. Al Safa Halal targets 7 million populations of Muslims in North America. National Foods:
- 5. National Foods Limitedis a Pakistani company founded in 1970, which started out as a spice company. In 1988, National Foods became the certified vendor of McCormick, USA. In the same year, National Foods, then a Private Limited company was converted into a Public Limited, listed in all the three stock exchanges of Pakistan. With a range of over 110 products in 13 major categories, National Foods is one of the largest food companies. The company was incorporated in Pakistan on February 19, 1970 as a private limited company under the Companies Act, 1913 and subsequently converted into a public limited company under the Companies Ordinance, 1984 by special resolution passed in the extra ordinary general meeting held on March 30, 1988. The company is principally engaged in the manufacture and sale of convenience based food products. It is listed on Karachi, Lahore and Islamabad Stock Exchanges
- 6. Abstract In this report,analysis of financial statements of Engro Foods Ltd and National Foods Ltd is done to evaluate their current financial performance. Horizontal analysis and vertical analysis over the years 2013 and 2014 is also done to see the trend of the performance of the two companies using the data from their annual reports of 2013-2014. Moreover intercompany, profitability and solvency analysis have also been carried out to get a clearer picture of the true position of both the companies.
- 7. Financial Statements Engro-Foods Ltd.Financial Statements: Engro-Foods 2014 Financial Statements: ENGRO FOODS PAKISTAN LIMITED Balance Sheet As at June 30, 2014 CURRENT ASSETS: Rs. Stores And Spares 1157 Stock In Trade 1527032 Trade Debts-Unsecured 22325 Advances Unsecured 13259 Deposits Short Term Prepayments And Other Receivables 410517 Mark-Up Accrued 489 Short Term Investment 500000 Tax Refund Due From Government 445479 Cash And Bank Balances 539039 3459297 NON CURRENT ASSETS Property Plant And Equipment 630754 Intangible Assets 9960 Long Term Investments 37823 Long Term Deposits And Prepayments 39216 717753 TOTAL ASSETS 4177050 CURRENT LIABILITIES Trade And Other Payables 988890 Short Term Borrowings – Secured - Provision For Taxation 311977 1300867 NON CURRENT LIABILITIES
- 8. Long Term Deposits37823 Deferred Liability Employee Benefit 74211 Deferred Taxation 22849 134883 SHARE CAPITAL AND RESERVES Authorized Share Capital 100000 Issued Subscribed And Paid Up Capital 75600 Reserves Capital Reserves 483 Revenue Reserves 2665217 2665700 2741300 TOTAL EQUITY AND LIABILITIES 4177050
- 9. ENGRO-FOODS PAKISTAN LIMITED INCOME STATEMENT Forthe Years Ended December 31, 2014 Rs'000 Sales 8329829 Less Cost Of Sales 4997901 GROSS PROFIT 3331928 Distribution Cost 1597220 Administration Expenses 468339 Other Operating Expenses 92660 2158219 Other Operating Income 55047 OPERATING PROFIT 1228756 Finance Cost (Interest Expense) 39735 Profit Before Taxation 1189021 Taxation 317728 PROFIT AFTER TAXATION 871293 Other Comprehensive Income - TOTAL COMPREHENSIVE INCOME FOR THE YEAR 871293 Earnings Per Share- Basic And Diluted Rs. 115.25
- 10. Engro-Foods 2013 FinancialStatements: ENGRO FOODS PAKISTAN LIMITED Balance Sheet As at June 30, 2013 CURRENT ASSETS: Rs. Stores And Spares 768 Stock In Trade 1281862 Trade Debts-Unsecured 23735 Advances Unsecured 3191 Deposits Short Term Prepayments And Other Receivables 233399 Mark-Up Accrued 3851 Short Term Investment 350000 Tax Refund Due From Government 219393 Cash And Bank Balances 461249 2577448 NON CURRENT ASSETS Property Plant And Equipment 582411 Intangible Assets - Long Term Investments 35830 Long Term Deposits And Prepayments 34498 652739 TOTAL ASSETS 3230187 CURRENT LIABILITIES Trade And Other Payables 924020 Short Term Borrowings – Secured - Provision For Taxation 223316 1147336 NON CURRENT LIABILITIES Long Term Deposits 35830 Deferred Liability Employee Benefit 69196 Deferred Taxation 17098 122124 SHARE CAPITAL AND RESERVES
- 11. Authorized Share Capital100000 Issued Subscribed And Paid Up Capital 75600 Reserves Capital Reserves 483 Revenue Reserves 1884644 1885127 1960727 TOTAL EQUITY AND LIABILITIES 3230187
- 12. ENGRO-FOODS PAKISTAN LIMITED INCOME STATEMENT Forthe Years Ended December 31, 2013 Rs'000 Sales 6428490 Less Cost Of Sales 3756277 GROSS PROFIT 2672213 Distribution Cost 1367249 Administration Expenses 403640 Other Operating Expenses 65757 1836646 Other Operating Income 12638 OPERATING PROFIT 848205 Finance Cost (Interest Expense) 35183 Profit Before Taxation 813022 Taxation 227510 PROFIT AFTER TAXATION 585512 Other Comprehensive Income TOTAL COMPREHENSIVE INCOME FOR THE YEAR 585512 Earnings Per Share- Basic And Diluted Rs77.45
- 13. Engro-Foods 2012 FinancialStatements: ENGRO-FOODS PAKISTAN LIMITED Balance Sheet As at June 30, 2012 CURRENT ASSETS: Rs. Stores And Spares 555 Stock In Trade 1123487 Trade Debts-Unsecured 23735 Advances Unsecured 4191 Deposits Short Term Prepayments And Other Receivables 255112 Mark-Up Accrued 385 Short Term Investment 310000 Tax Refund Due From Government 194326 Cash And Bank Balances 413269 2325060 NON CURRENT ASSETS Property Plant And Equipment 512480 Intangible Assets - Long Term Investments 31830 Long Term Deposits And Prepayments 24498 568808 TOTAL ASSETS 2893868 CURRENT LIABILITIES Trade And Other Payables 924020 Short Term Borrowings – Secured - Provision For Taxation 213390 1137410 NON CURRENT LIABILITIES Long Term Deposits 35830 Deferred Liability Employee Benefit 69196 Deferred Taxation 18000 123026 SHARE CAPITAL AND RESERVES
- 14. Authorized Share Capital100000 Issued Subscribed And Paid Up Capital 75600 Reserves Capital Reserves 4300 Revenue Reserves 1784044 1963994 TOTAL EQUITY AND LIABILITIES 3224380
- 15. ENGRO-FOODS PAKISTAN LIMITED INCOME STATEMENT Forthe Years Ended December 31, 2012 Rs'000 Sales 5128490 Less Cost Of Sales 3190462 GROSS PROFIT 1938028 Distribution Cost 1135349 Administration Expenses 403640 Other Operating Expenses 61111 1600100 Other Operating Income 13452 OPERATING PROFIT 341380 Finance Cost (Interest Expense) 35183 Profit Before Taxation 306197 Taxation 2275 PROFIT AFTER TAXATION 303922 Other Comprehensive Income TOTAL COMPREHENSIVE INCOME FOR THE YEAR 303922 Earnings Per Share- Basic And Diluted Rs65.55
- 16. Engro-Foods Horizontal Balance SheetComparative Analysis: ENGRO FOODS PAKISTAN LIMITED Comparative Horizontal Balance Sheet As at June 30, 2014 & 2013 Increase/ (Decrease) 2014(000) 2013(000) Amount Percentage CURRENT ASSETS Stores And Spares 1157 768 389 50.651 Stock In Trade 1527032 1281862 245170 19.126 Trade Debts-Unsecured 22325 23735 -1410 (5.940) Advances Unsecured 13259 3191 10068 315.512 Deposits Short Term Prepayments And Other Receivables 410517 233399 177118 75.886 Mark-Up Accrued 489 3851 -3362 (87.3019) Short Term Investment 500000 350000 150000 42.857 Tax Refund Due From Government 445479 219393 226086 103.050 Cash And Bank Balances 539039 461249 77790 16.865 3459297 2577448 881849 34.214 NON CURRENT ASSETS Property Plant And Equipment 630754 582411 48343 8.3 Intangible Assets 9960 - 9960 Long Term Investments 37823 35830 1993 5.562 Long Term Deposits And Prepayments 39216 34498 4718 13.676 717753 652739 65014 9.96 TOTAL ASSETS 4177050 3230187 946863 29.312 CURRENT LIABILITIES Trade And Other Payables 988890 924020 64870 7.020 Short Term Borrowings – Secured - -
- 17. Provision For Taxation311977 223316 88661 39.702 1300867 1147336 153531 13.381 NON CURRENT LIABILITIES Long Term Deposits 37823 35830 1993 5.562 Deferred Liability Employee Benefit 74211 69196 5015 7.247 Deferred Taxation 22849 17098 5751 33.635 134883 122124 12759 10.447 SHARE CAPITAL AND RESERVES Authorized Share Capital 100000 100000 0 Issued Subscribed And Paid Up Capital 75600 75600 0 Reserves 0 Capital Reserves 483 483 Revenue Reserves 2665217 1884644 780573 41.417 2665700 1885127 2741300 1960727 TOTAL EQUITY AND LIABILITIES 4177050 3230187 946863 29.312 Interpretation: Comparative Balance Sheet Engro Foods National-Foods Company's current assets have increased from 8% to 15% of total assets. This change is because of increase in supplies, merchandise inventory and cash as percentage of total assets. Noncurrent assets have decreased on the other hand from 92% to 85% due to decrease in long term investment and fixed assets percentage of the total assets. Current liabilities have also increased from 15% to 17% of total stockholders' equity and liabilities. While long term liabilities have decreased from 63% to 56% mostly due to decrease in long term financing. Stock holders' equity has increased as well from 37% to 44% of total stockholders' equity and liabilities. This shows that the company has more cushions now especially in case of current liabilities than in 2010 as current assets increased in greater percentage. Hence it is in a better condition to get more short term loans in 2011. However, long term assets and liabilities are still in the same position as both decreased by the same amount. Though, the company's position looks better than in 2010 as stockholders' equity has increased as well.
- 18. Engro-Foods Horizontal IncomeStatement Comparative Analysis: ENGRO-FOODS PAKISTAN LIMITED Comparative Horizontal Income Statement For the Years Ended December 31, 2014 and 2013 2014 2013 Increase/ (Decrease) Rs'000 Rs'000 Amount Percentage Sales 8329829 6428490 1901339 29.57675908 Less Cost Of Sales 4997901 3756277 1241624 33.05464427 GROSS PROFIT 3331928 2672213 659715 24.68796462 Distribution Cost 1597220 1367249 229971 16.81997939 Administration Expenses 468339 403640 64699 16.02888713 Other Operating Expenses 92660 65757 26903 40.91275454 2158219 1836646 321573 17.50870881 Other Operating Income 55047 12638 42409 335.5673366 OPERATING PROFIT 1228756 848205 380551 44.86545116 Finance Cost (Interest Expense) 39735 35183 4552 12.93806668 Profit Before Taxation 1189021 813022 375999 46.24708802 Taxation 317728 227510 90218 39.65452068 PROFIT AFTER TAXATION 871293 585512 285781 48.80873492 Other Comprehensive Income - Total Comprehensive Income For The Year 871293 585512 285781 48.80873492 EARNINGS PER SHARE- BASIC AND DILUTED RS. 115.25 RS77.45 37.8 48.80568108
- 20. Interpretation: Comparative IncomeStatement Engro Foods Income statement shows that the company's sales have increased by 18% hence supporting that the increase in current assets such as merchandise inventory was favorable to the company. However, this has caused a greater increase in the cost of goods sold of 19% hence the sales may not have a favorable effect on the operating performance. On the other hand net income shows a 70% increase since 2013, hence supporting that the company is doing better than in 2013. However, administrative expense, operating expense and financing costs have increased by 16%, 16% and 40% respectively which does not bode well about the future of the company especially as most of the increase is due to increase in salaries, wages and benefits in case of operating and administrative expenses. Though, large amounts of donations are also included in administrative expenses. Hence, further study is needed to assess whether Fauji Cement Company is doing well or not.
- 21. Engro-Foods Vertical BalanceSheet: ENGRO-FOODS PAKISTAN LIMITED Vertical Balance Sheet December 31, 2014, and 2013 2014 (Percent) 2013 (Percent) Current Assets Stores And Spares 0.027698974 0.023775713 Stock In Trade 36.5576663 39.68383255 Trade Debts-Unsecured 0.534468105 0.734787181 Advances Unsecured 0.317424977 0.09878685 Deposits Short Term Prepayments And Other Receivables 9.827916831 7.22555691 Mark-Up Accrued 0.011706827 0.119219104 Short Term Investment 11.97017034 10.83528601 Tax Refund Due From Government 10.66491902 6.791959722 Cash And Bank Balances 12.90477729 14.2793281 82.81674866 79.79253214 Non-Current Assets Property Plant And Equipment 15.10046564 18.03025645 Intangible Assets 0.238445793 Long Term Investments 0.905495505 1.109223707 Long Term Deposits And Prepayments 0.9388444 1.067987705 17.18325134 20.20746786 Total Assets 100 100 Current Liabilities Trade And Other Payables 23.67436349 28.60577422 Short Term Borrowings – Secured Provision For Taxation 7.468835662 6.9134078 31.14319915 35.51918202 Non-Current Liabilities Long Term Deposits 0.905495505 1.109223707 Deferred Liability Employee Benefit 1.776636622 2.142167001 Deferred Taxation 0.547012844 0.5293192
- 22. 3.229144971 3.780709909 Share CapitalAnd Reserves Authorized Share Capital 2.394034067 3.095796002 Issued Subscribed And Paid Up Capital 1.809889755 2.340421777 Reserves Capital Reserves 0.011563185 0.014952695 Revenue Reserves 63.80620294 58.3447336 65.62765588 60.70010807 Total Equity And Liabilities 100 100 Interpretation: Comparison Balance Sheet Engro Foods The above illustration of the balance sheet depicts that the current assets as a percentage of total assets have decreased from 40 percent in 2013 to 30 percent in 2014. Cause of this fall, as visible from the calculations can be largely attributed to the 16 percent reduction in the investments (stated in terms of the total assets). 3 percent contraction in the cash balances also contributes to one of the factors, apart from the other components that only changed by minute amounts. Noncurrent assets on the other hand experienced a rise, when stated in terms of the total assets. However, the total liabilities as a percentage of the total liabilities and stockholders’ equity increased by 1 percent, whereas the stockholder’s equity suffered a reduction of the same amount from 2013-2014. Even though, it might appear from the outlook, that the liabilities have increased, which goes against the company, and the stockholders equity has also reduced, adding to it further, and even a 1 percent change matters a lot, but, coming to a conclusion based on these results is not practical, other statements need to be considered too. Some accountants might take the above change positively too, depending upon how well the company is doing in terms of its profits, so that is what needs to be taken in to account.
- 23. Engro-Foods Vertical IncomeStatement: ENGRO-FOODS PAKISTAN LIMITED Vertical Income Statement December 31, 2014, and 2013 2014 2013 Sales 100 100 Less Cost Of Sales -60.000 -58.432 GROSS PROFIT 40.000 41.568 Distribution Cost 19.175 21.269 Administration Expenses 5.622 6.279 Other Operating Expenses 1.112 1.023 25.910 28.570 Other Operating Income 0.661 0.197 OPERATING PROFIT 14.751 13.194 Finance Cost (Interest Expense) 0.477 0.547 PROFIT BEFORE TAXATION 14.274 12.647 Taxation 3.814 3.539 PROFIT AFTER TAXATION 10.460 9.108 Other Comprehensive Income TOTAL COMPREHENSIVE INCOME FOR THE YEAR 10.460 9.108
- 24. Interpretation: Comparative IncomeStatement Engro The above comparative income statement for Engro-Foods indicates that the net income as a percentage of the net sales of the company has decreased by 5 percent (from 13 percent in 2013 to 8 percent on 2014), even though the company is still incurring profits. This decrease has mainly occurred because of the rise in the costs of merchandise sold which has brought about a 6 percent reduction in the gross profit (as a % of net sales), the expenses deducted later. The expenses also take up a large portion of the net sales, leaving the company with lower profits. This clearly shows that the company’s financial position is worse off compared to the previous year, and if this trend continues, losses might be incurred too.
- 25. NationalFoods Ltd.: National Foods2014 Financial Statement: NATIONAL FOODS PAKISTAN LIMITED Balance Sheet As at June 30, 2014 NON-CURRENT ASSETS Rs. Property, Plant And Equipment 1425169 Long Term Loans 1450 Long Term Deposits 12875 TOTAL NON-CURRENT ASSETS 1439494 CURRENT ASSETS Stores, Spares And Loose Tools 50972 Stock In Trade 1358128 Trade Debts 897675 Loans And Advances 317585 Trade Deposits And Prepayments 6105 Other Receivables 224949 Cash And Bank Balances 247951 TOTAL CURRENT ASSETS 3103365 TOTAL ASSETS 4542859
- 26. EQUITY AND LIABILITES ShareCapital And Reserves 0 Share Capital 120288 Reserves 1579538 1699826 NON-CURRENT LIABILITIES Long Term Financing-Secured 214263 Liabilities Against Assets Subject To Finance Lease 26262 Long Term Deposits 880 Deferred Liabilities 225641 TOTAL NON CURRENT LIABILITES 467046 CURRENT LIABILITIES Trade And Other Payables 1033217 Interest And Mark Up Accrued 40362 Short Term Borrowings Secured 1119143 Long Term Financing Secured 78762 Liabilities Against Assets Subject To Finance Lease 10070 Provision For Taxation 94433 TOTAL CURRENT LIABILITES 2375987 TOTAL EQUITY AND LIABILITES 4542859
- 27. NATIONAL-FOODS PAKISTAN LIMITED INCOME STATEMENT Forthe Years Ended December 31, 2014 Rs. Sales 9421408 Cost Of Sales 8127972 Gross Profit 1293436 Less Operating Expenses Distribution Cost 269522 Administrative Expenses 329829 Other Operating Expenses 48074 Finance Cost (Interest Expense) 177727 Other Operating Income -19648 805504 Profit Before Taxation 487932 Taxation 159827 Profit After Taxation 328105 Earnings Per Share (Eps) 2.72 Profit For The Year 328105
- 28. National Foods 2013Financial Statement: NATIONAL FOODS PAKISTAN LIMITED Balance Sheet As at June 30, 2013 Rs. NON CURRENT ASSETS Property, Plant And Equipment 1023725 Long Term Loans 2270 Long Term Deposits 8225 TOTAL NON CURRENT ASSETS 1034220 CURRENT ASSETS Stores, Spares And Loose Tools 27826 Stock In Trade 1253241 Trade Debts 793032 Loans And Advances 189053 Trade Deposits And Prepayments 4863 Other Receivables 140688 Cash And Bank Balances 208445 TOTAL CURRENT ASSETS 2617148 TOTAL ASSETS 3651368
- 29. EQUITY AND LIABILITES SHARECAPITAL AND RESERVES Share Capital 120288 Reserves 1401796 1522084 NON-CURRENT LIABILITIES Long Term Financing-Secured 142073 Liabilities Against Assets Subject To Finance Lease 36344 Long Term Deposits 740 Deferred Liabilities 152767 TOTAL NON CURRENT LIABILITES 331924 CURRENT LIABILITES Trade And Other Payables 787250 Interest And Mark Up Accrued 15703 Short Term Borrowings Secured 703174 Long Term Financing Secured 60000 Liabilities Against Assets Subject To Finance Lease 8962 Provision For Taxation 222271 TOTAL CURRENT LIABILITES 1797360
- 30. NATIONAL-FOODS PAKISTAN LIMITED INCOME STATEMENT Forthe Years Ended December 31, 2013 2013 Rs (000) Sales 7680237 Cost Of Sales 6086613 GROSS PROFIT 1593624 LESS OPERATING EXPENSES Distribution Cost 179308 Administrative Expenses 270830 Other Operating Expenses 65312 Finance Cost (Interest Expense) 160425 Other Operating Income -18239 657636 PROFIT BEFORE TAXATION 935988 Taxation 275162 PROFIT AFTER TAXATION 660826 EARNINGS PER SHARE (EPS) 5.49
- 31. National Foods 2012Financial Statements: NATIONAL FOODS PAKISTAN LIMITED Balance Sheet As at June 30, 2012 Rs. NON CURRENT ASSETS Property, Plant And Equipment 1009070 Long Term Loans 2300 Long Term Deposits 8000 TOTAL NON CURRENT ASSETS 1019370 CURRENT ASSETS Stores, Spares And Loose Tools 27826 Stock In Trade 1250000 Trade Debts 793032 Loans And Advances 189053 Trade Deposits And Prepayments 4800 Other Receivables 140688 Cash And Bank Balances 108445 TOTAL CURRENT ASSETS 2513844 TOTAL ASSETS 3533214
- 32. EQUITY AND LIABILITES SHARECAPITAL AND RESERVES Share Capital 120288 Reserves 1401796 1522084 NON-CURRENT LIABILITIES Long Term Financing-Secured 142073 Liabilities Against Assets Subject To Finance Lease 35000 Long Term Deposits 740 Deferred Liabilities 150099 TOTAL NON CURRENT LIABILITES 327912 CURRENT LIABILITES Trade And Other Payables 768790 Interest And Mark Up Accrued 12279 Short Term Borrowings Secured 689412 Long Term Financing Secured 60000 Liabilities Against Assets Subject To Finance Lease 8962 Provision For Taxation 211165 TOTAL EQUITY AND LIABILITES 3651368
- 33. NATIONAL-FOODS PAKISTAN LIMITED INCOME STATEMENT Forthe Years Ended December 31, 2012 Rs (000) Sales 7155237 Cost Of Sales 5065505 GROSS PROFIT 2089732 LESS OPERATING EXPENSES Distribution Cost 165890 Administrative Expenses 265780 Other Operating Expenses 65312 Finance Cost (Interest Expense) 160425 Other Operating Income 19850 637557 PROFIT BEFORE TAXATION 1452175 Taxation 275162 PROFIT AFTER TAXATION 1177013 EARNINGS PER SHARE (EPS) 3.99
- 34. National Foods Horizontal ComparativeBalance Sheet: NATIONAL FOODS PAKISTAN LIMITED Comparative Horizontal Balance Sheet As at June 30, 2014 & 2013 2014 2013 Rs (000) Rs (000) Rs. Change % NON CURRENT ASSETS Property, Plant And Equipment 1425169 1023725 401444 39.21404674 Long Term Loans 1450 2270 -820 -(36.12334802) Long Term Deposits 12875 8225 4650 56.53495441 TOTAL NON CURRENT ASSETS 1439494 1034220 405274 39.18644002 CURRENT ASSETS Stores, Spares And Loose Tools 50972 27826 23146 83.18119744 Stock In Trade 1358128 1253241 104887 8.369260182 Trade Debts 897675 793032 104643 13.19530612 Loans And Advances 317585 189053 128532 67.98728399 Trade Deposits And Prepayments 6105 4863 1242 25.53979025 Other Receivables 224949 140688 84261 59.89210167 Cash And Bank Balances 247951 208445 39506 18.95272134 TOTAL CURRENT ASSETS 3103365 2617148 486217 18.57812397
- 35. TOTAL ASSETS 45428593651368 891491 24.41526025 EQUITY AND LIABILITES SHARE CAPITAL AND RESERVES Share Capital 120288 120288 0 0 Reserves 1579538 1401796 177742 12.67959104 1699826 1522084 177742 11.67754211 NON-CURRENT LIABILITIES Long Term Financing-Secured 214263 142073 72190 50.81190656 Liabilities Against Assets Subject To Finance Lease 26262 36344 -10082 -27.74047986 Long Term Deposits 880 740 140 18.91891892 Deferred Liabilities 225641 152767 72874 47.70271066 Total Non-Current Liabilities 467046 331924 135122 40.70871645 CURRENT LIABILITIES Trade And Other Payables 1033217 787250 245967 31.24382344 Interest And Mark Up Accrued 40362 15703 24659 157.0336878 Short Term Borrowings Secured 1119143 703174 415969 59.15591305 Long Term Financing Secured 78762 60000 18762 31.27 Liabilities Against Assets Subject To Finance Lease 10070 8962 1108 12.36331176 Provision For Taxation 94433 222271 -127838 (57.51447557) TOTAL CURRENT LIABILITES 2375987 1797360 578627 32.19316108
- 36. TOTAL EQUITY ANDLIABILITES 4542859 3651368 891491 24.41526025 Interpretation: Comparative Balance Sheet National Foods From the balance sheet given above it can be seen that total assets of National Foods increased by 20% while total liabilities have increased by only 7% and stock holders' equity increased by 42%. Assets have increased largely due to increase in fixed assets, merchandise inventory and supplies in 2014. Cash has also increased by 40% which might be due to the fact that long term notes receivables have decreased by 17%, this shows a positive sign to good collection procedures of the company however notes receivable in the current assets have increased by 51%, the increase is in those that are considered secure hence company seems to have good credit system. Liabilities have increased mostly due to increase in short term notes payable, current portion of long term financing and increase in deferred vacation pay expense. Stockholders equity has largely increased due to 69% increase in subordinated loans and total reserves in 2014. Hence, company seems to be in better shape than in 2013 though further analysis is needed to reach conclusions.
- 37. National Foods HorizontalComparative Income Statement: NATIONAL FOODS PAKISTAN LIMITED Comparative Horizontal Income Statement For the Years Ended December 31, 2014 and 2013 2014 2013 Rs (000) Rs (000) Rs Change % Sales 9421408 7680237 1741171 22.67079779 Cost Of Sales 8127972 6086613 2041359 33.53850491 GROSS PROFIT 1293436 1593624 -300188 (18.8368147) LESS OPERATING EXPENSES Distribution Cost 269522 179308 90214 50.31231178 Administrative Expenses 329829 270830 58999 21.78451427 Other Operating Expenses 48074 65312 -17238 (26.3933121) Finance Cost (Interest Expense) 177727 160425 17302 10.78510207 Other Operating Income -19648 -18239 -1409 7.725204233 805504 657636 147868 22.48477881 PROFIT BEFORE TAXATION 487932 935988 -448056 (47.8698445) Taxation 159827 275162 -115335 (41.9153081) 0
- 38. PROFIT AFTER TAXATION 328105 660826-332721 (50.3492599) EARNINGS PER SHARE (EPS) 2.72 5.49 -2.77 (50.4553734) Interpretation: Comparative Income Statements National Foods From the statement of National-Foods Company above it can be seen that in the year 2011 the company's net income increased from 5% to 7% of the net sales. This increase is mainly owed to decrease in selling expenses and income tax expense and gives a positive image to the company. However, gross profit of the company has decreased by 1% of net sales which is a large amount. This is due to increase in cost of goods sold as percentage of net sales from that of the last year. Administrative expense and finance cost has increased in percentage of net sales as well, hence this does not give a good image of the company's administration and more cost minimizing strategies need to be pursued by the company in future to get higher returns.
- 39. National Foods VerticalBalance Sheet: NATIONAL-FOODS PAKISTAN LIMITED Vertical Balance Sheet December 31, 2014, and 2013 ASSETS 2014 2013 CURRENT ASSETS Cash And Bank Balances 5.458 5.709 Stores, Spares And Loose Tools 1.122 0.762 Stock In Trade 29.896 34.323 Trade Debts 19.760 21.719 Loans And Advances 6.991 5.178 Trade Deposits And Prepayments 0.134 0.133 Other Receivables 4.952 3.853 TOTAL CURRENT ASSETS 68.313 71.676 NON CURRENT ASSETS Property, Plant And Equipment 31.372 28.037 Long Term Loans 0.032 0.062 Long Term Deposits 0.283 0.225 TOTAL NON CURRENT ASSETS 31.687 28.324 TOTAL ASSETS 100 100 EQUITY AND LIABILITIES CURRENT LIABILITIES Trade And Other Payables 22.744 21.560 Interest And Mark Up Accrued 0.888 0.430 Short Term Borrowings Secured 24.635 19.258 Long Term Financing Secured 1.734 1.643 Liabilities Against Assets Subject To Finance Lease 0.222 0.245 Provision For Taxation 2.079 6.087 TOTAL CURRENT LIABILITES 52.302 49.224 NON-CURRENT LIABILITIES Long Term Financing-Secured 4.716 3.891
- 40. Liabilities Against AssetsSubject To Finance Lease 0.578 0.995 Long Term Deposits 0.019 0.020 Deferred Liabilities 4.967 4.184 TOTAL NON-CURRENT LIABILITIES 10.281 9.090 SHARE CAPITAL AND RESERVES Share Capital 2.648 3.294 Reserves 34.770 38.391 37.418 41.685 TOTAL EQUITY AND LIABILITES 100 100
- 41. National Foods VerticalIncome Statement: NATIONAL-FOODS PAKISTAN LIMITED Vertical Income Statement December 31, 2014, and 2013 2014 2013 Sales 100% 100% Cost Of Sales 86% 79% GROSS PROFIT 14% 21% Distribution Cost 3% 2% Admin And Other Expense 4% 4% Financial Cost 2% 2% Other Income 0% 0% Total Net Expense 9% 9% NET PROFIT BEFORE TAXATION 5% 12% Provision For Taxation 2% 4% NET PROFIT AFTER TAX 3% 9%
- 42. National-Foods & Engro-FoodsCondensed Common Size: Income Statement: NATIONAL-FOODS AND ENGRO-FOODS PAKISTAN LIMITED CONDENSED COMMON-SIZE INCOME STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2014 Sales ENGRO 100 NATIONAL 100 Less Cost Of Sales 60.000 86.27 GROSS PROFIT 40.000 13.73 Distribution Cost 19.175 2.86 Administration Expenses 5.622 4.015 Other Operating Expenses 1.112 - Other Operating Income 0.661 2 Finance Cost (Interest Expense) 0.477 1.9 Profit Before Taxation 14.274 5.2 Taxation 3.814 1.7 Profit After Taxation 10.460 3.5 Other Comprehensive Income TOTAL COMPREHENSIVE INCOME FOR THE YEAR 10.460 8.604
- 43. Balance Sheet: NATIONAL-FOODS ANDENGRO-FOODS PAKISTAN LIMITED CONDENSED COMMON-SIZE BALANCE SHEET FOR THE YEAR ENDED DECEMBER 31, 2014 CURRENT ASSETS NATIONAL 68.313 ENGRO 82.816 TOTAL NON-CURRENT ASSETS 31.687 17.183 TOTAL ASSETS 100 100 EQUITY AND LIABILITIES CURRENT LIABILITIES 52.302 31.143 NON-CURRENT LIABILITIES 10.281 3.229 SHARE CAPITAL AND RESERVES 37.418 65.627 TOTAL EQUITY AND LIABILITIES 100 100
- 44. Conclusionof Common SizedFinancialRecords: The common-size analysis indicates that National-Foods and Engro-Foods are very different food manufacturing companies. The gross profit for National-Foods was 40 percent of sales, which is much better than the gross profit as a percentage of sales for Engro-Foods i.e. 13 percent. There is a difference of 27 points, which is present because of a greater cost of sales percentage of Engro-Foods, since there is not much difference in their prices. National-Foods are selling, general, and administrative expenses are at about 25 percent of sales, while Engro- Foods’s is only seven percent of sales. National-Foods can be evaluated to be more efficient by looking at its ratios, horizontal, and vertical analysis, and it operates on a low-cost structure. However, it spends more in marketing and advertisement than Engro-Foods, therefore it has greater expenses. The total comprehensive income for the year is also higher as a percentage of sales for National-Foods than for Engro-Foods. This is another factor that proves National-Foods to be more efficient. The common-size balance sheet also shows that most of the total assets of National-Foods comprise of current assets. Even though same is the case with Engro-Foods, the percentage of National-Foods is higher by 14 points. This indicates that National-Foods have a higher liquidity than Engro-Foods. Moreover, the current liabilities of Engro-Foods as the percentage of total liabilities and equity are higher than that of National-Foods. This again points towards National- Foods having higher solvency and liquidity, and being able to run its day to day transactions more easily.
- 45. Financial Ratios Financial ratiosare ratios that express a relationship between two countable variables of the company. A good analyst can deduce the situation of the company through financial ratios, since they show a wide range of aspects and enable us to see their evolution in time. All users of a corporations information, whether internal or external, show keen interest in its ability to cover up its obligations, known as solvency, and its capability to ear positive net income (profits), also known as its profitability. Financial ratios can therefore, be broadly divided in to these categories. Using them as main headings, we have also tried to further analyze both the cement manufacturing companies’ situations, by calculating all ratios that me under them, interpretations of which are briefed below:
- 46. Engro-Foods: 2014 2013 Solvency Analysis: CurrentPosition Analysis: Working Capital 2,158,430 1,430,112 Current Ratio 2.65 2.46 Quick Ratio 1.48 1.15 Ratio of fixed Assets to long term liabilities 5.32 5.34 Ratio of Total liabilities to Total Stock holders' Equity 0.53 0.56 Number of times Interest Charges Earned 30.92 24.11 Accounts Receivable Turnover 373.12 370.89 Number of Days' Sales in Receivables 0.99 1 Inventory Turnover 3.56 2.94 Number of Days' Sales in Inventory 102.7 124.19 Profitability Analysis: Ratio of net sales to assets 2.27 2.35 Rate earned on total assets 33.20% 31% Rate earned on Stock holders' Equity (%) 44.80% 34.48% Rate earned on Common Stock holders' Equity (%) 37.06% 27.74% Earnings per share on Common Stock 115.25 77.45 Price earnings ratio 5.73 12.64 Dividends per share 11.94RS 8RS Dividends yield 1.81% 0.81%
- 47. Interpretation: Solvency Analysis: Starting fromthe solvency measures, which are listed separately under its heading in the table on the previous page. The increase in the working capital from 2013 to 2014 shows that the current assets of this company exceed its current liabilities, but the gap between them is significant, which means that the assets have increased, therefore the company has more capital available to settle its short term debts. Another form of expressing the relationship between current assets and current liabilities is that of the current ratio (also known as the working capital ratio), increase in which again indicates the same benefit as was with the working capital. The quick ratio has also increased from 1.15 to 1.48, which supports the above stated statement that Engro Food’s ability to retire its short term debts have been strengthened. When, under the heading of solvency, it comes to analyzing the accounts receivables, the increase in the accounts receivables (from 370 to 373 in 2014) turnover indicates that there has been slight improvement in the credit department and collection procedures which is also backed up the reduction in the accounts receivables on the balance sheet and the decrease in the number of days’ sales in receivables (from 1 to 0.99). The inventory turnover has also increased which is a result of the increase in costs of merchandise sold mainly, along with the decrease in
- 48. the number ofdays’ sales in inventories which presents a positive picture of the company. Furthermore, the ratio of fixed assets to long term liabilities has also decreased, at the same time, the ratio of total liabilities to total stockholders’ equity has decreased, which shows that the claims of creditors are reduced as compared to the owners’ equity. It is of immense importance because when, if ever, the company is unable to meet its obligations, the creditors will not take it over. And, as the number of times interest charges earned has increased significantly, from 24.11 to 30.92, which clearly indicates that the company has gained strength. Nevertheless, these measures are still not enough, so we need to consider profitability ratios as well. Profitability Analysis: Now, considering Engro Foods profitability, the decrease in the ratio of net sales to assets (from 2.35 to 2.27) points towards the company’s decreased efficiency in utilizing its assets to their maximum , the rate earned on total assets has increased which shows that the profitability of the assets has improved. The rate earned on stockholders equity has reduced which leaves the company with a leverage of 12.11 (as of 2011). The rate earned on common stockholder’s equity has risen illustrating that higher rate of profits are earned by the common stockholders, although preferred stocks are not present, supported by the increased earnings per share in 2014 (77.45 to 115.25). A lower price
- 49. earnings ratio providesinformation about the lack of investors’ expectations about the future. Moreover, the higher dividends per share and a higher dividend yield ratio specify that the market price of shares has also increased. In short, the company’s ability to make profit and progress has been enhanced during this year, also visible from the higher net income, and this goes in favor of its reputation National Foods:
- 50. 2014 2013 Solvency Analysis: CurrentPosition Analysis: Working Capital 727378 819788 Current Ratio 1.31 1.46 Quick Ratio 0.71 0.74 Ratio of fixed Assets to long term liabilities 3.08 3.115 Ratio of Total liabilities to Total Stock holders' Equity 0.267 0.237 Number of times Interest Charges Earned 3.75 6.83 Accounts Receivable Turnover 238.0 212.0 Number of Days' Sales in Receivables 2.2 2.6 Inventory Turnover 4.09 5.04 Number of Days' Sales in Inventory 89.12 72.43 Profitability Analysis: Ratio of net sales to assets 3.29 2.29 Rate earned on total assets 16.20% 25% Rate earned on Stock holders' Equity (%) 19.30% 51.60% Rate earned on Common Stock holders' Equity (%) 19.30% 51.60% Earnings per share on Common Stock 27.27RS 54.95RS Price earnings ratio 8.8 4.18 Dividends per share 12.51RS 14.75RS Dividends yield 5.20% 6.40%
- 51. Interpretation: SolvencyAnalysis: Solvency analysis ofa company shows a company's ability to satisfy its liabilities. The ability of the company to satisfy its current liabilities can be seen from current position analysis. National Foods current position analysis shows that its working capital was positive both in 2013 and 2014 hence meaning that its current assets were greater than its current liabilities. However, the working capital decreased from 2013 to 2014. Current ratio has also decreased from 1.46 to 1.31 in 2014.While quick ratio has also fallen from 0.74 to 0.71. This shows that the company is in an unfavorable position in 2014 to get short term credit than in 2013 and its instant debt paying ability has diminished. Also, as the company's quick ratio is below 1 it does not provide a satisfactory cushion to the current liabilities and company needs to further improve these ratios for debt security. Ratio of fixed assets to long term liabilities has fallen in 2014. However as it are greater than 2 it is quite satisfactory and company seems in a good position to borrow from long term creditors and has leverage. Ratio of total liabilities to total Stockholders' equity has increased in 2014 from 0.237 to 0.367. This shows that the controlof the stockholders over the company has slightly increased over claims of creditors. Number of times Interest Charges Earned have declined in 2014 from 6.83 to 3.75. This is not good for the company as it shows that the guarantee of interest payments being made on continuing basis has declined if earnings decrease. Hence it decreases creditor’s confidence making it difficult to get loans. Accounts receivable turnover has increased from 212 to 238 in 2014, while number of days sales' in receivables have decreased to 2.2 from 2.6. This indicates that account receivables collection has improved, as has the time receivables, are left outstanding. Inventory turnover decreased from 5.04 to 4.09 for National Foods in
- 52. 2014 while, numberof days' sales in inventory on the other hand increased. This shows that company's inventory management has becomeinferior since 2013 as inventory stockhas increased as have costof goods sold and it takes more days to buy and sell inventory in 2014. Overall, in terms of solvency the company's position has declined from 2013, though there is room for improvement. Profitability Analysis: Profitability analysis shows the ability of the business to earn profits. This depends to a large extent on how effectively and efficiently resources are utilized. Ratio of net sales to assets is a measure of utilization of assets. It can be seen that ratio of net sales to assets of National Foods Companyhas increased in 2014 from 2.29 to 3.29. However the rate earned on total assets has decreased from 25% to 16.20%. Hence showing that the company is now not better at utilizing its assets in 2014 than in 2013. Rate earned on stockholders' equity decreased from 51.30% to 19.30% as well in 2014, giving the company less leverage. Hence, the company is now earning lower amounts on assets acquired with creditors' funds than the interest paid to the creditors. Rate earned on common stockholders' equity has also fallen from 2013, as have the earnings per share on common stock. Hence, showing that the company's common stockholders have less leverage now than in 2013 shedding a negative light on the company. National FoodsCompany's price earnings ratio has increased in 2014 mainly due to decrease in market price per share. Dividends have been given to common stock has also fallen. This does not look good for the company as it decreases investors’ confidence as they would not be getting reduced. Hence, it would be good for the company to declare more
- 53. dividends. Overall, howeverthe company's profitability has decreased in 2014 and its looks in a worse position than in 2013.